We sometimes have to make payments to suppliers via proforma invoices. The goods are usually dispatched a day or two later and then we get a VAT invoice so I've never really worried about the timing. However, in July we placed an order with a supplier (large National company) and made a proforma payment for goods that have a long lead time and won't be supplied until September.
My understanding is that a tax point was created when we made the payment and they should issue a VAT invoice within 30 days of that date. However, they are saying that they won't issue a VAT invoice until the goods are dispatched which will be well over 30 days and closer to 60 days. I have escalated it from sales to their finance department who have confirmed that their systems will not issue a VAT invoice until dispatch and in the meantime, our payment will sit on the account as a non-vatable transaction. It's only a small amount (under £50 of VAT) but I wanted to check if what they are doing is correct or if it's non-compliant with VAT rules. What are your thoughts?
Thanks
Replies (18)
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A couple of links to send their way :
https://www.gov.uk/hmrc-internal-manuals/vat-trader-records/vatrec9030
Supplier uses incorrect tax point, for example issue of VAT invoice rather than receipt of payment.
https://www.gov.uk/hmrc-internal-manuals/vat-trader-records/vatrec9020
If the issuer of a pro-forma invoice subsequently receives payment and/or makes a supply, a full VAT invoice must be issued within 30 days. The tax point will follow the normal rules.
And also this https://www.gov.uk/hmrc-internal-manuals/vat-time-of-supply/vattos3600
I've had the same situation as well when I've chased for a VAT invoice- 'the system won't generate a VAT invoice until the goods are despatched'. You know you're in the right, but you'll have to wait until the despatch occurs and then ask for the VAT invoice...
Thanks to Jason for the links - useful reference
My thoughts (not legal knowledge are)
It is quite logical for sales invoice to be issued at time of dispatch, delivery note and invoice created at same time.
If despatch over several days could be more than one invoice and delivery note.
I have seen occasions when final invoice not identical in value to the Proforma and refund or balancing payment required.
Proforma invoices (the receipt of..) were the bane of my life in manufacturing.
I could never really see the point (beyond a bit of cash flow window dressing) of 'raising' them myself. Our systems only produced VAT invoices, so proformas would have to be done on Word - with all the attendant problems
In my view the concept should just be removed. All invoices should be proper VAT invoices from day one.
Switch to using suppliers who don't insist on payment before delivery of goods/service would be my suggestion?
As a regular supplier can you ask for a credit account instead? I think its certainly a reasonable request.
Interesting. My energy supplier has revised their contract terms to state that direct debit payments to account must be made a MINIMUM of one month in advance. Should I insist on a pro-forma VAT invoice, for any amount I pay more than 30 days in advance. They would argue that this is a simple payment on account. I am not sure why that does not apply to other supplies.
Is there such a thing as a proforma vat invoice?
Surely just a proforma invoice or a vat invoice
Agreed @Leywood - the whole basis of a pro forma invoice is that it is not a VAT invoice (even though they often do include an amount notated as "VAT").
Am I alone in thinking that utility companies do themselves no favours (from a strict double-entry, accounting viewpoint) by combining the invoicing aspects (charges and therefore P&L) and the statement of account items (payments and therefore Bal Sheet) on the same document that they send out to their customers?